NFT vs. Commerce! Exploring the Similarities and Differences
We explore the connections and differences between NFTs — a hot topic these days — and the world of e-commerce that we work in every day. We'll also take a look at how Shopify is getting involved with NFTs.
What Is an NFT?
As some of you may already know, NFT stands for Non-Fungible Token — a new application of blockchain technology.
Digital creations like art have always been easy to copy, which has made it difficult to establish genuine scarcity or ownership.
NFTs address this by linking digital content to its ownership record on the blockchain, making it possible to clearly define who owns what.
Because ownership is recorded on the blockchain, buying and selling that ownership becomes straightforward.
Depending on how the blockchain program is set up, it's also possible to automatically redirect a portion of secondary sales back to the original creator — giving creators a stake in the resale market.
NFT Case Studies
When NFTs first made headlines, the focus was primarily on digital art. The buzz was largely speculative, with news stories about NFTs selling for tens of millions of dollars dominating the conversation.
Since then, use cases have diversified significantly. NFT ownership now comes with perks, serves as a status symbol, and has given rise to exclusive owner communities.
One example is Bored Ape Yacht Club — an NFT project featuring ape-themed artwork. The project programmatically generated 10,000 unique ape images, each minted as its own NFT.
A variety of strategies have been employed to increase the value of these NFTs.
Specifically:
- There is a culture of NFT holders using their ape's image as their Twitter profile picture.
- Exclusive communities have been formed for NFT holders, with real-world events like parties and concerts in New York.
- Holders can generate new dog NFTs from their ape NFTs or mutate their ape into a new variant.
- A time-limited mobile game exclusive to NFT holders is planned for release, with in-game items expected to be high-value.
and more.
As a result, the popularity of these NFTs has skyrocketed. NFTs that originally sold for around 20,000 yen are now valued at an average of approximately 20 million yen.
Another project, Axie Infinity, lets players battle NFT characters against each other in a game where winning actually earns real money.
Similarities and Differences Between Traditional Commerce and NFTs
Below, we compare the Bored Ape Yacht Club type of NFT with traditional commerce.
In traditional commerce, while the approach varies by product, the ideal scenario is this:
You want customers to become fans of your product or brand — not only returning again and again themselves, but also spreading the word to those around them.
High-end brands become status symbols simply by virtue of ownership, and owners sometimes gather in clubs (like Mercedes-Benz clubs).
In these respects, traditional commerce and NFTs share a great deal in common.
Now let's look at where they differ.
What makes NFTs distinct is that what's being sold is data on the blockchain. That data can be used for online events or games, and reselling NFTs is remarkably easy.
Of course, resale and owner-exclusive events have always been possible in traditional retail — but the barriers are completely different.
Simply lowering barriers can transform entire industries. The spread of private cars made it easier to travel to the suburbs, which contributed to the rise of specialty retailers like Uniqlo. The spread of smartphones made internet access effortless, which led to the explosive growth of countless online services.
The impact of simply "lowering the barrier" can be far greater than anyone expects.
Both NFTs and traditional commerce aim to raise brand value through community building and status symbolism — but their underlying goals differ.
In traditional commerce, the goal of increasing brand value is to sell more products. This is ultimately the seller's objective.
In NFTs, the goal is for the value of the NFT to appreciate on the secondary market. This serves both the NFT holder (who can resell it) and the original creator (who receives a percentage of secondary sales).
What makes NFTs unique is that the incentive to grow the brand aligns perfectly between sellers and holders. This makes holders far more motivated to promote the NFT to others, and communities tend to grow more organically as a result.
Sure, someone who buys a Rolex watch might hope it appreciates in value someday — but even if they tell others about it, the community doesn't suddenly explode in size and the resale price doesn't shift dramatically as a result.
The reason NFT holders can actually benefit from rising brand value is that the underlying asset is digital — meaning communities can grow rapidly online — and because blockchain management makes secondary market trading frictionless and vibrant.
Shopify Can Now Issue and Sell NFTs
Remarkably, Shopify now supports NFT minting and sales. (As of November 2021, this feature is in beta.)
In fact, the NBA's Chicago Bulls sold NFTs through Shopify and sold out in 90 seconds.
NBA's Chicago Bulls launch first NFT sale on Shopify's online store
Currently, the dominant venues for NFT sales are marketplaces like OpenSea.
Just as Shopify carved out a path from marketplaces like Amazon to merchants' own storefronts in traditional retail, it appears to be eyeing the same opportunity in the NFT space.
It certainly makes sense to sell NFTs through a dedicated storefront, since NFTs require a stronger emphasis on values and community. However, secondary market trading is a critical component of NFT value — so simply being able to create and sell NFTs on Shopify isn't enough on its own.
Axie Infinity is a well-known example of a platform with built-in secondary market functionality, but its architecture is fundamentally different from today's Shopify. Just how far will Shopify venture into this space?
Closing Thoughts
The core shared belief among NFT holders is: "Hold on to it because the value will go up."
The enthusiasm that belief generates is extraordinary — and while I can feel that energy, my instincts as someone rooted in traditional retail make me hesitate to call it a "pure" purchase.
But perhaps that instinct is simply a sign of old thinking.
I've tried comparing NFTs with traditional commerce in this article, but since they're selling fundamentally different things, it's not really a matter of which is superior. My sense is that both will continue to evolve and incorporate new approaches as each expands its market.
As for Shopify, it currently feels like it's still testing the waters with NFTs. I'm curious to see whether it focuses on capturing the primary market, or whether it reaches further into the much larger secondary market.